Things look normal during reboot until it gets to the silo prompt, only the letters "SI" slowly appear. The error message that appears after a couple of minutes is "Program terminated" next I'm back at the ok prompt. The same happens if I try to boot the partition manually, e.g.:
boot disk:f /boot/image

Thanks for the link..I visited that site but missed that diagram, very helpfull but I'm still not sure how to correct my problem. I have tried two kernel builds already, development-sources (linux-2.6.6) and sparc-sources (linux-2.4.26-sparc-r2).

I did notice something strange though, the symlink /usr/src/linux still points to /usr/src/linux-2.6.6 and not /usr/src/linux-2.4.26-sparc-r2 which is the last one I built.

It seems that /boot wether as its own partition or if hanging of /<ROOT> has to be withing the first number of sectors in the drive (<6G?). I moved the partition to the first slice and the boot process completed.